Chicago Soybeans May Have Found Fair Market Value If Demand Can Be Trusted

Commodity

Summary:

Soybean prices were already on their way to a historical downward correction before suspicions of a record U.S. crop...

Soybean prices were already on their way to a historical downward correction before suspicions of a record U.S. crop were confirmed this week, and the latest price levels could be satisfactory if demand is cooperative.

But that is a big "if."

CBOT November soybean futures notched an all-time low on Wednesday of $9.55-1/4 per bushel, the most-active contract's lowest level since Sept. 2, 2020.

That follows the U.S. Department of Agriculture's forecast on Monday that showed 2024-25 U.S. soy ending stocks rising 62% on the year to 560 million bushels, the third-highest ever and far above trade expectations at 465 million.

The huge stocks number resulted from a bigger soybean crop than anyone predicted, primarily due to an unusually large surge in planted acres.

Soybean futures have averaged $9.72 per bushel since Monday, the week's lowest average price since $8.99 in 2020, which was the third consecutive year of sub-$9 prices in mid-August.

But when adjusting past prices for inflation, the $9.72 becomes the week's lowest average price since 2006, in the very early stages of China's soybean import boom.

The substantial weakening of prices over the last few months suggests the market was already bracing for a situation as bearish as what USDA revealed this week.

November soybeans have tumbled as much as 23% since the start of the year and they are trading about 26% lower than in mid-August of 2023. Both of those departures are the largest in at least three decades, though the new price levels seem to fit the fundamental setup.

New Scenario, New Price

The swelling U.S. soy supplies are less burdensome in context with demand. USDA's latest estimates imply 2024-25 U.S. stocks-to-use at 12.8%, a five-year high and well above the prior year's 8.4%.

That is only the fifth-highest ratio of the last two decades and it does not break the top 20 when considering the full 61-year dataset. Stocks-to-use during the U.S.-China trade war in 2018-19 had surged to a three-decade high of 23.4%.

Analyzing historical August stocks-to-use forecasts against the corresponding price levels suggests November beans somewhere between $9.25 and $10 per bushel given the current 12.8% outlook for 2024-25. Chicago Soybeans May Have Found Fair Market Value If Demand Can Be Trusted_1

Chicago Soybeans May Have Found Fair Market Value If Demand Can Be Trusted_1

That means soybeans may already be hovering near fair market value, but the trade's mistrust of demand could spoil that conclusion.

USDA's projection of 2024-25 U.S. soy exports is very conservative relative to the crop size, but many industry members are skeptical whether U.S. exporters can capture enough business from top buyer China as recent sales have been slow.

Chinese soymeal futures this week fell to more than one-year lows amid high inventory levels, and yet more soybeans are poised to arrive from leading supplier Brazil. China's feed demand has struggled in recent years while Brazil's crop potential keeps expanding, both threatening the U.S. market.

Correcting In 2025

Barring any unexpected stimulation in demand, U.S. farmers may have to slash soy acres in 2025 to prevent a further ballooning of domestic stocks, especially if the renewable fuel push that was supposed to lift soybean use continues to prove disappointing.

Farmers in 2024 increased soy area by 4% on the year while cutting corn by a similar degree due to better profitability potential for the oilseed. Despite the rise, this year's soy plantings of 87.1 million acres are more than 3 million below 2017's high.

Overplanting in 2017 and again in 2018, combined with the 2018 trade war that choked U.S. soy exports, led to all-time-high ending stocks of 925 million bushels in 2018-19.

The inadvertent correction of this situation started with severe flooding during planting in 2019, and farmers in 2020 eased up on plans amid the pandemic-driven price collapse. Combined, this wiped away more than 10 million soybean acres from original ideas.

It took a while for futures to respond meaningfully, as they stayed below the $10 mark from June 2018 to September 2020, though it was the resurgence of Chinese buying in mid-2020 that was the initial catalyst for bean prices to start their journey higher.

Source: Reuters

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FXOpen

Forex

Important Takeaways for AUD/USD and NZD/USD Analysis Today

· The Aussie Dollar started a downside correction from 0.6640 against the US Dollar.

· There is a key bullish trend line forming with support at 0.6610 on the hourly chart of AUD/USD at FXOpen.

· NZD/USD is declining from the 0.6080 resistance zone.

· There is a major bullish trend line forming with support at 0.6010 on the hourly chart of NZD/USD at FXOpen.

AUD/USD Technical Analysis

On the hourly chart of AUD/USD at FXOpen, the pair started a fresh increase from the 0.6500 support. The Aussie Dollar was able to clear the 0.6580 resistance to move into a positive zone against the US Dollar.

There was a close above the 0.6600 resistance and the 50-hour simple moving average. Finally, the pair tested the 0.6640 zone. A high was formed near 0.6642 and the pair is now correcting gains. Market Analysis: AUD/USD Rallies While NZD/USD Trims Gains_1

Market Analysis: AUD/USD Rallies While NZD/USD Trims Gains_1

There was a move below the 0.6630 level. The pair declined below the 23.6% Fib retracement level of the upward move from the 0.6579 swing low to the 0.6642 high. On the downside, initial support is near a key bullish trend line at 0.6610.

The next major support is near the 61.8% Fib retracement level of the upward move from the 0.6579 swing low to the 0.6642 high at 0.6600.

If there is a downside break below the 0.6600 support, the pair could extend its decline toward the 0.6580 level. Any more losses might signal a move toward 0.6545.

On the upside, the AUD/USD chart indicates that the pair is now facing resistance near 0.6640. The first major resistance might be 0.6650. An upside break above the 0.6650 resistance might send the pair further higher.

The next major resistance is near the 0.6700 level. Any more gains could clear the path for a move toward the 0.6740 resistance zone.

NZD/USD Technical Analysis

On the hourly chart of NZD/USD on FXOpen, the pair started a steady increase from the 0.6000 zone. The New Zealand Dollar broke the 0.6035 resistance to start the recent increase against the US Dollar.

The pair climbed above 0.6060 and the 50-hour simple moving average. It tested the 0.6080 zone and is currently correcting gains. The pair corrected lower below the 0.6060 level. The pair also traded below the 50% Fib retracement level of the upward wave from the 0.5988 swing low to the 0.6081 high. Market Analysis: AUD/USD Rallies While NZD/USD Trims Gains_2

Market Analysis: AUD/USD Rallies While NZD/USD Trims Gains_2

The NZD/USD chart suggests that the RSI is now well below 50 and signaling more downsides. On the downside, there is major support forming near 0.6010 and a trend line.

The trend line is close to the 76.4% Fib retracement level of the upward wave from the 0.5988 swing low to the 0.6081 high. The next major support is near the 0.5990 level.

If there is a downside break below the 0.5990 support, the pair might slide toward the 0.5980 support. Any more losses could lead NZD/USD in a bearish zone to 0.5950.

On the upside, the pair might struggle near 0.6035. The next major resistance is near the 0.6060 level. A clear move above the 0.6060 level might even push the pair toward the 0.6080 level. Any more gains might clear the path for a move toward the 0.6200 resistance zone in the coming days.

Risk Warnings and Disclaimers

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Thomas

Bond

Foreign investors may start shying away from Thailand's sovereign bonds, as the prospect of a tighter monetary policy compared with peers and rising political risk in the country reduces their attractiveness.

That would mark a turnaround in sentiment after global funds ploughed in US$1.70 billion (RM7.55 billion) into Thai bonds this quarter, the most since 2022, making them one of the best performers in the region. Forecasts for rate cuts in South Korea, India, the Philippines and Indonesia this year are likely to raise the appeal of their sovereign bonds over Thai debt with the Bank of Thailand (BOT) only expected to start cutting rates next year.

"Thai government bonds may not outperform emerging Asian peers in the next six months on expectations of modest and delayed 50 basis points of rate cuts only in 2025," said Jennifer Kusuma, a senior Asian rates strategist at Australia and New Zealand Banking Group Ltd in Singapore. "Foreign sentiment would likely take a hit, not least as any prolonged political vacuum would raise uncertainties around the growth and policy outlook."

Thai stocks fell on Wednesday, signalling rising political risk premium in the country, after a Constitutional Court dismissed Prime Minister Srettha Thavisin from office after finding him guilty of an ethics violation.

Global Rush for Thai Debt May Cool on BOT Policy, Political Risk_1

Some investors may also see an opportunity to take profit after a Bloomberg index of Thai bonds indicated returns of 6.80% so far this quarter, the highest in emerging Asia after Malaysia.

Global funds poured into Thai bonds this quarter after outflows in four of the previous five quarters. Recent signs of a US Federal Reserve policy pivot also prompted global funds to snap up short-term bills to wager on the local currency, sending the baht up by around 5% this quarter. About 55% of the total foreign inflows this quarter went into short-term bills.

Kasikornbank Pcl sees foreign inflows into Thai bonds as temporary. "The upcoming Jackson Hole symposium will likely prompt the market to reduce their dovish expectations for the Federal Reserve," said Kobsidthi Silpachai, a Bangkok-based head of capital market research at the bank.

Source: Bloomberg

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Glendon

Economic

Chevron Corporation (CVX) is one of the world’s largest and most diversified energy companies. Known for its extensive operations in oil, natural gas, and renewable energy sectors, Chevron has been a key player in the global energy market for over a century. The company’s stock, listed on the New York Stock Exchange under the ticker symbol CVX, is a significant component of the Dow Jones Industrial Average and is widely held by investors seeking exposure to the energy sector. In this article, we delve into how FintechZoom provides in-depth coverage and analysis of Chevron stock, offering valuable insights, real-time data, and advanced analytical tools. Additionally, we’ll explore how FastBull enhances this analysis, providing investors with a powerful combination of resources for making informed decisions.

Chevron (CVX) Overview

Chevron is an integrated energy company with a broad portfolio of assets across the oil, gas, and renewable energy markets. The company is involved in every aspect of the energy industry, from exploration and production to refining, marketing, and transportation. Chevron’s global operations span over 180 countries, and its products are essential to the world economy.

Key Factors Influencing CVX Stock

Oil and Gas Prices: Chevron’s financial performance is closely tied to fluctuations in oil and gas prices. As a major producer, the company’s revenue and profitability are directly impacted by the global demand and supply dynamics of these commodities.

Global Economic Conditions: The health of the global economy plays a significant role in Chevron’s stock performance. Economic growth drives demand for energy, which in turn affects Chevron’s revenue. Conversely, economic downturns can lead to reduced energy consumption and lower profits.

Energy Transition and Renewable Investments: With the global shift towards cleaner energy, Chevron has been investing in renewable energy projects and technologies. The company’s ability to adapt to the energy transition is a critical factor for its long-term growth prospects.

Geopolitical Risks: As an international energy company, Chevron faces geopolitical risks that can impact its operations and profitability. Political instability, trade policies, and regulatory changes in key markets are factors that investors must consider when analyzing CVX stock.

Dividend Yield: Chevron is known for its strong dividend yield, making it an attractive stock for income-focused investors. The company’s commitment to returning capital to shareholders through dividends is a key factor in its stock valuation.

FintechZoom’s Comprehensive Analysis of Chevron Stock

FintechZoom is a leading financial technology platform that offers extensive coverage and analysis of Chevron (CVX) stock. The platform provides investors with a range of tools and resources designed to help them make informed decisions in the complex and rapidly evolving energy market.

Key Features of FintechZoom’s Chevron Stock Analysis

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Market Sentiment and Analyst Ratings: FintechZoom aggregates market sentiment, analyst ratings, and price targets for Chevron stock. This information provides investors with a comprehensive view of how the market perceives Chevron and its potential for future growth.

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Enhancing Chevron Stock Analysis with FintechZoom

Real-Time Data and News

For investors in Chevron, staying updated with real-time data is crucial due to the volatility in the energy markets. FintechZoom excels in providing continuous updates on Chevron’s stock price, trading volume, and related news. This feature is particularly important during earnings reports, oil price fluctuations, or geopolitical events that can lead to rapid stock price movements.

Comprehensive Financial Metrics

FintechZoom’s financial analysis tools offer a deep dive into Chevron’s financial statements, including income statements, balance sheets, and cash flow statements. Investors can use these tools to assess Chevron’s financial stability, profitability, and growth potential. Additionally, FintechZoom allows users to compare Chevron’s financial metrics with those of its peers in the energy sector, providing a broader context for investment decisions.

Advanced Charting Tools

For investors who rely on technical analysis, FintechZoom’s advanced charting capabilities are invaluable. The platform offers customizable charts with a wide range of technical indicators, including moving averages, RSI, MACD, and Bollinger Bands. These tools enable investors to identify key support and resistance levels, monitor price trends, and develop trading strategies tailored to Chevron’s stock behavior.

Historical Performance Analysis

Understanding the historical performance of Chevron stock is crucial for making informed predictions about its future movements. FintechZoom provides access to historical price data, earnings reports, and other performance metrics, allowing investors to analyze how Chevron has responded to various market conditions over time. This analysis can be instrumental in forecasting future price movements and identifying long-term investment opportunities.

FastBull’s Role in Chevron Stock Analysis

FastBull is a fintech platform that specializes in real-time market signals and expert analysis. When integrated with FintechZoom’s comprehensive platform, FastBull’s tools provide investors with additional resources to optimize their investment strategies in Chevron stock.

FastBull’s Contributions to Chevron Stock Analysis

Real-Time Market Signals: FastBull offers real-time market signals that alert investors to significant market movements and potential trading opportunities. For Chevron stock, these signals can help investors identify entry and exit points, particularly during periods of high volatility in the energy markets.

Expert Analysis and Strategic Insights: FastBull provides detailed reports and expert commentary on Chevron’s market position, competitive landscape, and future growth prospects. This analysis complements FintechZoom’s coverage by offering investors a deeper understanding of the factors driving Chevron’s stock performance.

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The Power of Integration

The collaboration between FastBull and FintechZoom creates a powerful synergy for investors. By combining FastBull’s real-time market signals and expert analysis with FintechZoom’s comprehensive data and tools, investors are equipped with a robust toolkit for making informed decisions and maximizing their returns on Chevron stock.

Conclusion

Chevron (CVX) continues to be a key player in the global energy market, with its stock performance closely watched by investors worldwide. FintechZoom provides a comprehensive platform for analyzing Chevron stock, offering real-time data, in-depth financial analysis, advanced charting tools, and expert insights. The integration of FastBull’s real-time market signals and strategic analysis further enhances FintechZoom’s offerings, giving investors a complete set of tools to navigate the complexities of Chevron stock investing.

As the energy market continues to evolve, the collaboration between FintechZoom and FastBull highlights the importance of fintech innovation in shaping the future of stock analysis and investment strategies. With the right tools and insights, investors can make informed decisions, capitalize on opportunities, and effectively manage risks in the ever-changing landscape of the stock market.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Glendon

Economic

The U.S. Census Bureau reported a robust increase in retail sales for July, with overall sales rising by 1% month-over-month and 2.7% year-over-year. This figure surpassed expectations, as the consensus forecast from Dow Jones projected a 0.3% increase. The strong performance was broad-based, with 10 out of 13 categories posting gains, the highest number in recent months.

Drivers of Retail Growth

Several factors contributed to the surge in retail sales: Back-to-school and college spending , along with special deal days offered by retailers, provided a midsummer boost. Falling retail prices and 15 consecutive months of positive real wage growth have been key tailwinds for spending despite increasing growth concerns. Auto sales were the main driver, up 3.6%, as financing costs eased further.

Key Sectors Impacted by Retail Sales Growth

1. Automotive Sector

The automotive industry has seen a notable rebound, with retail sales of automobiles contributing significantly to the overall growth. The increase in consumer confidence, coupled with promotional activities and financing options, has encouraged spending in this sector. However, while overall retail sales rose, the automotive sector's growth was somewhat tempered by ongoing supply chain issues and rising costs, which may affect future sales.

2. Electronics and Communication Equipment

The electronics sector, particularly communication equipment, experienced a remarkable surge, with sales increasing by 12.7% year-on-year. This growth was driven by the release of new models from major brands, reflecting strong consumer demand for the latest technology. This sector's performance indicates a shift towards more discretionary spending as consumers prioritize upgrading their devices.

3. Food and Beverage Industry

The food and beverage sector continued to show stability, with essential items such as grains and oils seeing a 9.9% increase in sales. This growth reflects a consistent demand for basic necessities amidst broader economic fluctuations. However, the restaurant sector experienced a slight decline, with revenue growth slowing to 3% from 5.4% in the previous month, indicating a potential shift in consumer spending habits towards home dining due to economic uncertainties.

4. Clothing and Footwear

The clothing and footwear sectors faced challenges, with sales declining as consumers became more cautious with discretionary spending. This decline is indicative of a broader trend where consumers prioritize essential goods over luxury or non-essential items, reflecting ongoing economic concerns and inflationary pressures.

5. Home Goods and Furnishings

Sales in the home goods and furnishings sector have also been affected, with consumers showing restraint in spending on larger items. The housing market's slowdown, characterized by declining home sales and prices, has contributed to this cautious behavior. As consumers prioritize immediate needs, spending on home improvement and furnishings has seen a decline.

6. Service Sector

The service sector, particularly travel and leisure, has benefited from increased consumer spending as restrictions ease and summer vacations prompt more travel. The service industry saw a 7.2% increase in retail sales, reflecting a growing appetite for experiences over goods. This trend highlights a potential shift in consumer behavior towards valuing experiences, particularly in the context of post-pandemic recovery.

Implications for the Federal Reserve

The robust retail sales data has prompted a reassessment of the market's outlook on potential interest rate cuts by the Federal Reserve. Initially, there was speculation about a 50 basis points rate cut; however, this has now been adjusted to a more conservative 25 basis points.Unless there is a significant deterioration in economic indicators, such as job gains falling to between no gain and 50,000 in August or the unemployment rate increasing to 4.4% or more, the Federal Reserve will likely opt for a 25 basis points rate cut in September.

Outlook for Economic Growth

The strong retail sales data has added to the positive outlook for economic growth in the third quarter. The Atlanta Fed's forecast for the third quarter was 2.9% before the data release. However, it is crucial to monitor consumer sentiment and broader economic conditions to assess the sustainability of this growth momentum.In conclusion, the July retail sales figures have defied growth concerns and underscored the resilience of the U.S. economy. While the Federal Reserve may adopt a more cautious approach to monetary easing, the overall outlook remains positive, with consumer spending continuing to drive economic expansion.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Warren Takunda

Economic

The dollar index DXY today is down by -0.16% at a 1-week low. The dollar is under pressure as today’s as-expected US Jul CPI report reinforced expectations for the Fed to cut interest rates at next month’s FOMC meeting, a bearish factor for the dollar. However, losses in the dollar are limited as expectations for a 50 bp rate cut by the Fed at the Sep 17-18 FOMC meeting were reduced to 47% today from 75% last week.

US MBA mortgage applications rose +16.8% in the week ended Aug 9, with the purchase mortgage sub-index up +2.8% and the refinancing sub-index up +34.5%. The average 30-year fixed rate mortgage fell -1 bp to a 5-month low of 6.54% from 6.55% the previous week.

US July CPI eased to 2.9% y/y from 3.0% y/y, better than expectations of no change at 3.0% y/y and the smallest year-on-year increase in over three years. July CPI ex-food and energy eased to 3.2% y/y from 3.3% y/y in Jun, right on expectations and the smallest annual increase in 3-1/4 years.

The markets are discounting the chances at 100% for a -25 bp rate cut at the Sep 17-18 FOMC meeting and at 47% for a -50 bp rate cut at that meeting.

EUR/USD EURUSD today is up by +0.38% at a 7-1/4 month high. The euro is finding support today from a weaker dollar. Also, speculation that the Fed will cut interest rates by more than the ECB is boosting the euro as swap markets have priced in 100 bp of Fed rate cuts by December, compared to only 70 bp of cuts by the ECB. Gains in the euro are limited after Eurozone Jun industrial production unexpectedly declined.

Eurozone employment eased last quarter as Q2 employment rose +0.2% q/q and +0.8% y/y, weakening from +0.3% q/q and +1.0% y/y in Q1.

Eurozone June industrial production unexpectedly fell -0.1% m/m, weaker than expectations of +0.5% m/m.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 96% for the September 12 meeting.

USD/JPY USDJPY today is up by +0.09%. The yen is under pressure today after Japanese Prime Minister Kishida said he won't run for a second term as leader of Japan's ruling party, which creates political uncertainty in Japan. Also, today’s rally in the Nikkei Stock Index to a 1-1/2 week high reduced safe-haven demand for the yen. The yen recovered from its worst levels today after T-note yields declined.

Swaps are pricing in the chances for a +10 bp rate hike by the BOJ at 0% for the September 20 meeting and +11% for the October 30-31 meeting.

December gold today is down -10.90 (-0.43%), and September silver is up +0.019 (+0.074%). Gold and silver prices today are mixed, with silver posting a 1-week high. Reduced expectations for a 50 bp rate cut at next month’s FOMC meeting are weighing on gold prices today as swap markets have priced in only a 47% chance for a 50 bp rate cut, down from 75% last week. A negative factor for silver was today’s report that showed an unexpected decline in Eurozone June industrial production, a bearish factor for industrial metals demand.

Today’s decline in the dollar index to a 1-week low is bullish for metals prices. Also, lower T-note yields today are supportive of precious metals. In addition, safe-haven demand for precious metals remains strong as an attack by Iran on Israel may be imminent in retaliation for the recent assassination of a Hamas political leader in Tehran.

Source: BarChart

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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FastBull Featured

Data Interpretation

Economic

The U.S. Bureau of Labor Statistics will release the July CPI data on August 14 (Eastern Time). The market broadly expects headline CPI for July to rise by 3% year-over-year, consistent with June's figure, and by 0.2% month-over-month. Core CPI is expected to increase by 3.2% year-over-year, slightly slowing from June's 3.3% rise, and by 0.2% month-over-month, higher than June's 0.1%.

Since March of this year, price increases in the U.S. have been showing signs of slowing, with the June CPI report surprising on the downside, continuing this declining trend. The subsequent decline in nonfarm payroll data and the unexpected rise in the unemployment rate further strengthened market expectations for interest rate cuts. As the U.S. economy and labor market show signs of fatigue, the latest inflation report will draw significant market attention and could influence the timing of a potential policy shift.

July CPI: A Major Release

Fed Chairman Jerome Powell previously hinted that rate cuts could occur as soon as September. The Fed is focusing more attention on the August nonfarm payrolls and CPI data. This report is the second-to-last CPI release before the Fed's next rate decision (in September), potentially adding weight to the prospect of a rate cut in September.

Should an unexpected upward trend emerge, it could rekindle market concerns about stagflation, as it would imply that the Fed may not be able to cut rates quickly even in the face of an economic slowdown. On the other hand, if core inflation continues to decline, it could strengthen the Fed's confidence in cutting rates while boosting investor sentiment, further fueling expectations for a 50-basis-point rate cut in September.

Housing Inflation

Housing-related costs, which account for about one-third of the CPI weight, have been one of the most stubborn components of inflation and are key to whether core inflation can decrease. Overall, although housing inflation has been slow to decline, the trend is still downward. In June, housing prices rose 0.2% month-over-month, while rent and owners' equivalent rent (OER) both rose 0.3%, all moderating from previous figures.

However, based on the latest data on new and existing home sales, the inventory of new homes for sale in the U.S. remained at a high of 476,000 units as of the end of June, enough to supply 9.3 months of demand, the longest period since October 2022. The inventory of existing homes increased by 23.4% year-over-year, enough for 4.1 months of supply, the highest in four years. Meanwhile, both new home sales and existing home sales fell more than expected, with U.S. new home sales down 0.6% and existing home sales down 5.4% month-over-month in June.

In terms of prices, new home prices remain high, and existing home prices rose 4.1% year-over-year, hitting a new record. Coupled with mortgage rates rising to an average of nearly 7% in June, affordability remains a challenge for buyers. The continued decline in mortgage applications suggests that lower borrowing costs may be necessary to stimulate demand.

In summary, on the one hand, homeowners who secured low-interest-rate mortgages before the pandemic are unlikely to sell their homes in today's high-rate environment, which reduces the supply of homes for resale and supports home prices. On the other hand, high mortgage rates and home prices are deterring buyers, while the slowdown in inflation suggests interest rates may drop in the coming months, leading more potential buyers to adopt a wait-and-see attitude or even shift to renting, thereby supporting rental market prices.

Thus, despite the ongoing deflationary trend, July's main residential rents and OER are expected to rebound moderately, supporting core inflation.

Energy Inflation

Energy prices continued to decline in June, falling 2.0% month-over-month. The significant 3.8% drop in gasoline prices was a major reason for the CPI slowdown in June, offsetting the impact of rising housing prices.

According to the American Automobile Association (AAA), as of July 31, the national average price of unleaded gasoline was $3.48 per gallon, a 0.2% decrease from the end of June and 8% lower year-over-year. AAA spokesperson Andrew Gross noted that despite hurricane impacts and record holiday travel, overall gasoline demand has decreased, an unusual phenomenon for the holiday season that may signal a shift in demand trends.

Additionally, based on the latest data from the Energy Information Administration (EIA), U.S. gasoline demand dropped from 9.25 million barrels per day to 8.96 million barrels per day. Total domestic gasoline inventories rose from 223.8 million barrels to 225.1 million barrels. The decline in demand for gasoline, combined with an increase in supply and stable oil costs, could further drive gasoline prices down.

The downward trend in gasoline prices currently appears to be persistent, which could lead to another drop in energy commodity prices. Since energy commodities account for more than 60% of the overall energy category, this reduction could lower energy inflation. It is expected that energy inflation will continue to decelerate in this upcoming report.

New and Used Vehicles

Although prices for both new and used vehicles decreased in June, the costs associated with automotive maintenance and insurance have actually risen significantly, creating a challenging environment in the automotive market.

Data from Manheim, the largest used car auction platform in the U.S., indicates that the Manheim Value Index rose to 201.6 in July, reflecting a MoM increase of 2.8% - the first uptick in ten months. Wholesale prices for used cars, adjusted for model, mileage, and seasonality, have also surpassed those of June. Furthermore, combining insights from vAuto, Manheim estimates that retail sales of used cars in July increased by 5% MoM while experiencing a 2% decline YoY.

Meanwhile, the Dealertrack Credit Availability Index reveals that the overall loan index dropped for the fourth consecutive month, landing at 92.9 in July. Access to automotive credit across all channels and lender types is diminishing. Elevated interest rates and stringent credit conditions continue to limit the industry's sales potential. Many consumers are opting to hold off or seek more affordable options, as evidenced by the rising rates of credit delinquencies and defaults.

According to Cox Automotive's automotive market report, new vehicle sales in July experienced a YoY decline of 2.0% and a MoM decrease of 3.0%. The average transaction price for new vehicles remained relatively stable compared to June, with a slight YoY decrease of 0.2%. The CDK cyberattack in June hindered many dealerships' ability to process transactions, leading to a decline in new vehicle sales for that month. The automotive dealers association anticipated this event could drive sales in July; however, it appears that July has not fully recovered the losses incurred in June.

Overall, it is expected that new vehicle prices may continue to show a downward trend, while the rate of decline for used vehicle prices is expected to narrow MoM.

Transportation Services

In the transportation services sector, after a 0.9% increase in April, there were consecutive MoM declines of 0.5% in May and June, primarily driven by fluctuations in airfare and automobile insurance premiums.

Since the onset of the COVID-19 pandemic, automobile insurance premiums have surged, becoming a significant factor contributing to the super core inflation in the U.S. According to the latest report from Insurify, the average cost of full auto insurance in the U.S. rose to US$2,329 in the first half of 2024, marking a 15% increase compared to last year and a staggering 48% rise from 2021. The escalation in car maintenance and repair costs, alongside frequent climate-related disasters, has compelled insurance companies to raise premiums to protect their profits. It is expected that insurance premiums will further increase by the end of 2024, suggesting that this segment may continue to experience substantial growth in the current data.

Airfare recorded MoM changes of -3.56% and -5% in May and June respectively, primarily influenced by a continuous decline in jet fuel prices. Although these prices experienced a temporary rebound at the end of June, peaking at US$102.75 per barrel in early July, a reversal in trend in mid to late July may indicate a further decline in airfare for that month.

Overall, considering the ongoing possibility of a slowdown in "energy inflation," it seems that the headline CPI may continue to align with the trend of easing inflation. However, slight increases in tenant rents and owners' equivalent rent, along with rising motor vehicle insurance rates, could result in a mild uptick in the MoM pace of core inflation.

It is important to note that this CPI release may differ somewhat from previous ones. The last time inflation fell to 3% was in July 2023, after which it began a rebound. As a result, there has been speculation that the "final mile" of inflation will become increasingly challenging to navigate, characterized by potential turbulence. With inflation returning to 3% again, the question of whether it will rebound like it did last year has become a central focus for the market, influencing expectations going forward.

If a rebound occurs, the market may perceive inflation as remaining sticky, and the "door" to the "final mile" of inflation might remain firmly shut, potentially dampening expectations for interest rate cuts. This could lead to a significant rebound in the U.S. Dollar Index, possibly exceeding the impacts of prior CPI results. Conversely, as long as headline inflation remains stable at 3%, there may not even be a need for rate cuts; given the market's tendency to act preemptively, this could still be viewed as a victory, resulting in a swift increase in expectations for rate reductions.

Therefore, regarding the upcoming CPI data, the primary focus should be on whether the headline CPI can stabilize at 3%.

The Fed indicated in its July interest rate decision statement that while long-term inflation expectations remain persistent, the risks of inflation rising have diminished. They reiterated that action would only be considered when there is greater confidence in inflation sustainably moving towards the 2% target.

However, the weak U.S. employment report for July has raised recession expectations and heightened concerns about maintaining interest rates at excessively high levels for too long. The market is currently pricing in a 100% chance of a rate cut in September, shifting attention to how much the Fed should reduce rates. The release of this data may lead to market speculation on whether the Fed will cut rates by 25 basis points or adopt a more aggressive stance with a 50 basis point reduction.

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